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Global Market Report - 6 October

Lex Hall  |  06 Oct 2020Text size  Decrease  Increase  |  
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Australia

Australian shares are set to rise following gains on Wall Street overnight as investors welcomed more stimulus and the US President gets set to leave hospital.

The Australian SPI 200 futures contract was up 16 points, or 0.3 per cent, to 5,942 points at 8.30am Sydney time on Tuesday, suggesting a positive start to trading.

US stocks rose sharply on Monday, recovering from declines in the previous session, as investors viewed more fiscal stimulus as likely and after news President Donald Trump will leave the hospital where he is being treated for covid-19.

The Dow Jones Industrial Average rose 465.83 points, or 1.68 per cent, to 28,148.64, the S&P 500 gained 60.16 points, or 1.80 per cent, to 3,408.6 and the Nasdaq Composite added 257.47 points, or 2.32 per cent, to 11,332.49.

Australia's share market has had its best session since 16 June on Monday as fund managers bought in after a negative September and a big-spending federal budget looms.

Treasurer Josh Frydenberg will offer a jobs lifeline for up to 700,000 Australians aged under 35 who have been forced onto welfare payments, The Australian reports.

Average families will receive up to $5,000 in income tax relief and young Australians will be targeted through a back-to-work wage subsidy in a budget that will map a path to economic recovery and seek to prevent a lost generation of unemployed.

The S&P/ASX200 benchmark index closed higher by 150.1 points, or 2.59 per cent, to 5,941.6 points on Monday.

The gain is the best since the 3.89 per cent jump of 16 June. The All Ordinaries index finished up by 151.9 points, or 2.54 per cent, to 6,135.1.

Gold was up 0.7 per cent at $US1,913.36 an ounce; Brent oil was up 5.5 per cent to $US41.41 a barrel; Iron ore Markets closed for a week-long Chinese holiday.

Meanwhile, the Australian dollar was buying 71.74 US cents at 8.30am, down from 71.93 US cents at Tuesday’s close.

Asia

Japanese shares bounced back on Monday, led by buying in value firms including railway companies, after doctors said Trump was recovering well, just a few days after his covid-19 results sparked widespread alarm.

The Nikkei share average rose 1.23 per cent to 23,312.14.

Chinese markets were closed for a week-long holiday. 

Europe

European shares closed at a two-week high on Monday, as positive updates on Trump’s health, a US stimulus package and a spate of dealmaking activity lifted investor spirits.

The pan-European STOXX 600 index gained 0.8 per cent, extending gains from last week. Sectors considered more economically sensitive such as oil and gas, travel and leisure, and automakers boosted the main markets.

That was despite a 36.2 per cent plunge in Cineworld after the world's second-biggest cinema chain said it would close all of its UK and US movie theatres later this week, leaving as many as 45,000 workers unemployed.

Oil majors Royal Dutch Shell, BP and Total surged, with crude prices jumping more than 6 per cent.

Investors took heart from signs that Trump’s health is improving after he tested positive for covid-19 on Friday, news that sent financial markets into a tailspin.

Doctors treating Trump said he could be sent back to the White House as soon as Monday, although outside experts warn that his case may be severe, raising uncertainty about the outcome of the 3 November presidential election and a new US fiscal stimulus being debated by lawmakers in Washington.

“Markets may remain choppy over the coming weeks,” said Graham Secker, chief European equity strategist at Morgan Stanley.

“Once we get some clarity on the US election, Brexit and the vaccine front, I think that’s going to be a positive catalyst for the market.

“In the next 3–6 months view, this is a market where you’d want to buy into the weakness because we do expect 2021 to be quite a lot better than what we have been seeing this year.”

Telecom stocks rose the most among sectors, with Vodafone up 4.7 per cent after its lenders approved the merger of India's Bharti Infratel and Indus Towers, in which Vodafone has a stake.

Madrid-listed stocks outperformed with 1.2 per cent on reports of consolidation in the banking sector.

Unicaja jumped 15.1 per cent after it confirmed reports that it was in preliminary talks for a potential merger with its peer Liberbank, which surged 13.6 per cent.

Italy's Nexi rose 3.1 per cent after SIA and it agreed a long-awaited merger to create a dominant domestic payments group with 1.8 billion euros ($2.8 billion) in revenue.

French waste and water utility Suez fell 4.2 per cent after investment fund Ardian decided not to make a bid in competition with bigger rival Veolia.

 

North America

Donald Trump said he felt “really good” and was due to leave Walter Reed National Military Medical Center at 6:30 p.m. (8:30 AEST). Trump has been at the hospital since late Friday.

Shares of Regeneron Pharmaceuticals jumped 7.1 per cent after Trump's physician said he had been treated with Regeneron's experimental antibody treatment for the disease, which has killed more than a million people worldwide and wreaked economic havoc.

White House Chief of Staff Mark Meadows said on Monday there was still potential to reach an agreement with US lawmakers on more coronavirus relief and that Trump was committed to getting the deal done.

“The stimulus deal is still sitting there, and there’s still communication going on ... It looks increasingly like something’s going to get done,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

Also, “any news that says the president is looking better is sort of news of less volatility, disruptions and unknowns, all of which scare investors,” he said.

Doubts about the scale of further fiscal aid and a slowing economic recovery have weighed on the S&P 500 recently, with the benchmark index in September registering its worst month since the coronavirus-driven crash earlier this year.

Also helping the market on Monday was positive economic data.

After data last week showed an unexpected slowdown in the domestic manufacturing sector in September, figures on Monday showed activity in the broader services industry pulled above levels that prevailed before the covid-19 pandemic.

is content editor for Morningstar Australia

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